Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)Chapter 3
Schedule 3 - Life Insurance
Outline of chapter
3.1 Schedule 3 to the Bill amends section 216 of the Life Insurance Act 1995 (LI Act) to provide for the new arrangements for unclaimed life insurance moneys.
Context of amendments
3.2 Currently, life insurance companies within the meaning of the LI Act are required to report on and pay unclaimed moneys to the Commonwealth. There are two limbs to the definition of unclaimed moneys in the LI Act. Unclaimed moneys includes sums payable on the maturity of a policy which are not claimed within seven years after the maturity date of the policy. Unclaimed moneys also includes sums of money that have become legally payable with respect to policies where the time within which proceedings may be taken for their recovery (Subsections 216(1), 216(3) and 216(15), LI Act).
3.3 ASIC must maintain a register that contains details of unclaimed moneys subject to the LI Act (Subsection 216(13), LI Act).
3.4 Owners of unclaimed moneys are able to lodge claims for the return of the value of their money at any time through funds appropriated by Parliament for that purpose (Subsections 216(7) and 216(12), LI Act).
3.5 The new arrangements will reduce the period before life insurance moneys are treated as unclaimed moneys to three years. They also allow for the payment of interest from 1 July 2013.
Context of amendments
3.6 The new law amends the LI Act to change the unclaimed moneys period from seven years to three years and provide for the payment of interest on unclaimed moneys claimed after 1 July 2013.
Comparison of key features of new law and current law
| New law | Current law |
| Life insurance amounts become unclaimed moneys three years after a policy matures. | Life insurance amounts become unclaimed moneys seven years after a policy matures. |
| Claimants are able to seek the return of unclaimed moneys at any time through an appropriation by Parliament. This would include an interest component . | Claimants are able to seek the return of unclaimed moneys at any time through an appropriation by Parliament. No interest is payable . |
Detailed explanation of new law
3.7 The Bill modifies subsections 216(15), paragraph (c) to change the time period before life insurance moneys become unclaimed moneys from seven years to three years. [Schedule 3, item 3,subsection 216(15)]
3.8 The Bill provides that owners of unclaimed moneys will be entitled to a payment of interest, which will be calculated according to the regulations. This interest does not accrue prior to 1 July 2013. The regulations may prescribe different rates for different periods over which interest accrues. It is intended that interest will be calculated in accordance with the Consumer Price Index (CPI) and that a nil rate will be able to be prescribed where the CPI does not change between given periods. [Schedule 3, item 1, subsections 216(7A), 216(7B), 216(7C)]
Application and transitional provisions
3.9 The amendments in this Chapter will commence the day after the Act receives the Royal Assent.